Pain in the Fast Lane

January 1, 2003

While all motor carriers involved in hauling transborder freight will be affected by the strict new pre-notification demands proposed by Customs on both sides of the border, couriers and providers of ...

January 1, 2003
by
Ian Putzger

Categories

While all motor carriers involved in hauling transborder freight will be affected by the strict new pre-notification demands proposed by Customs on both sides of the border, couriers and providers of expedited services will likely be the hardest hit. The indications that have emanated from the authorities so far have many operators in these sectors worried that the Canada Customs and Revenue Agency and its U.S. counterpart are bent on a framework that would seriously hurt, if not outright cripple, the way they are currently conducting business.

Procedures changed in the aftermath of September 11, 2001, but those modifications have had little impact on the operations of most courier companies. “It’s not a lot different from the past. We didn’t have to change our operations,” acknowledges Renate Jalbert, Managing Director of Global Trade Services at FedEx.

The main change to date has been the focus on traffic from unknown shippers. Those are asked to leave their packages open for inspection, and the shipments are identified with prominent red labels, says Clive Shepherd, President of TNT International Express Canada, adding “it’s not quite skull and crossbones, but not far from that.”

Procedures at the Canada-U.S. border have become markedly standardized. One express operator says privately that the handling of courier traffic there is now uniform, whereas in the past there were variations. The officials have certainly stepped up their scrutiny, especially where new traffic patterns emerge. TNT recently started a new linehaul operation between Montreal and New York and was treated as an unknown quantity for a considerable length of time, Shepherd reports.

“They’re wary of new activities. If you’ve moved everything by air so far and you start a road operation, the first time you roll up to the border, your vehicle will likely be stripped. It’ll be stuck there for hours. That probably happens a few times until they know you and understand your patterns,” he comments.

Established operations have been moving courier traffic across the border smoothly so far, but this could change with the new rules on the horizon. Basically those are taking two directions: Regular shippers and their carriers who participate in the CSA and C-TPAT programs are going to migrate to the FAST system, which exempts them from having to provide manifest information at the border. Moreover, those firms can use special lanes at the border crossings. Such lanes were opened at several crossings starting in December.

FedEx was one of the couriers which moved quickly to take advantage of the FAST program. The only challenge has been getting the photos of their drivers taken, because this can only be done at the border, adds Virginia Albanese, Vice President of Service. “We hope they’ll allow us to use other locations to get pictures taken,” she says.

But FedEx Custom Critical usually carries traffic for just one customer on one truck, so if the client has embraced the requisite programs, the traffic sails through the border under CSA. For couriers who typically deal with traffic from a multitude of customers – not all of them CSA participants – the authorities are planning a different set-up. They will be required to operate under Advance Commercial Information (ACI) rules, which require submission of manifest data to Customs prior to arrival at the border. That way the CCRA can determine what shipments it wants to check while the traffic is on the way.

There has been some confusion about the time frame for the advance warning that Customs requires. Originally the agency talked about a 12-hour window, but recently it suggested that getting the information 2 hours prior to arrival would be acceptable. Further confusing the matter, U.S. Customs indicated in mid-January that it is considering an 8-hour advance notice for expedited air cargo, 12 hours for regular air cargo and four hours for truck traffic crossing into the U.S.

“Four hours (for trucks) becomes a 24-hour delay. That, in essence, eliminates the expedite industry, both ground and air, ” says David Miller, a spokesperson for Con-Way Transportation Services in regards to the proposed demands of U.S. Customs.

Shippers’ mode of operation would be changed dramatically, Shepherd agrees.

“They would have to start to prepare the shipment by mid-day, if we had to get the information to U.S. Customs eight hours in advance (for air freight). It would be a complete change of processes,” he reflects.

Phil Cahley, Executive Director of the Canadian Courier and Messenger Association (CCMA) adds that the proposed changes by Customs on both sides of the border would drive some companies out of business altogether.

Moreover, this would not only hurt the courier industry; it would have painful repercussions for its users as well, he warns. “ACI will have serious impacts, not only for the courier industry but also for the whole trade community,” he says. “It will impact trade, how fast you can get your goods. In the automotive industry it could perhaps mean the end of JIT.”

Lengthy advance notice windows would also hit firms’ abilities to respond to emergencies, adds Joel Childs, Vice President of Marketing of FedEx Custom Critical. “Often customers don’t know they have an issue until it arises,” he comments.

Shepherd expresses sympathy for the predicament of Customs, which has to manage a much higher workload without a significant increase in staffing levels. “Customs wants the data ahead so they can intercept packages. That’s clean for them, but it’s basically unworkable in terms of the advance time. If I collect a shipment at 6 p.m. in Toronto, there’s no way I’m going to make the flight out if they need the manifest data hours in advance,” he says.

The CCMA also has reservations about the type of data that Customs wants, especially the harmonized system code. Cahley says that sometimes the receiving party does not have an HS code, for instance when one-time shippers are involved or when the traffic goes to a non-resident importer. “It’s a challenge to determine the accurate HS classification in very short time windows,” agrees Jalbert.

The CCMA is wondering what happens if any of the data is missing. Would that make the shipment not admissible into the country, asks Cahley. “And what do you do then? You can’t send the aircraft back,” he continues.

Besides forcing about new procedures, the new regulations are also bound to require investment from the industry. That could be particularly tough for small players that haven’t submitted data electronically to the CCRA so far.

Sam Barone, Principal of Ottawa-based logistics consultancy Transportation Partners, reckons that larger companies will have an advantage, since they already have the necessary systems. “The smaller ones will be at a disadvantage if they don’t have those systems in place. Government agencies will insist on doing it electronically,” he comments.

Cahley stresses that the CCMA is not opposed to ACI as such; it wants to make it workable. To him, the way the government’s security efforts have gone appears like a knee-jerk reaction that focuses on the wrong elements, like the HS code. C-TPAT and FAST would be a more viable route for the courier industry to take, he says. “CSA offers significant advantages for both shipper and carrier,” agrees Jalbert.

In addition, the CCMA advocates the use of intelligent systems to target shipping patterns that are already being used in the industry. Cahley cites systems that detect suspicious patterns, such as automotive shipments going to Parkdale, an area in Toronto known for crime and drug problems. “Customs should take a look at those systems and benchmark from there,” he says.

Just like the final verdict on the timeframe for ACI notification is still in the air, it is unclear at the moment when ACI will be introduced. The CCRA has targeted this year for its implementation, but operators reckon that this is not feasible. Cahley points out that all parties involved in the process – from shipper, courier and carrier to consignee – have to be in the loop, with
their systems able to communicate with each other. Today this only exists in some cases, but not for the bulk of the industry and trade community, he argues. In his opinion, it will take about two years to get there. On the other side of the border, U.S. Customs has until Oct.1 to publish its advanced electronic cargo reporting rules.

Perhaps worse than concerns about how rigid the authorities are going to be in this debate is the sinking feeling in the industry that it is vulnerable to future terrorist action. Cahley fears that such an event would cause the authorities to revert to even more drastic measures, regardless of their ramifications for the courier business. “If we had another terrorist incident next week, the government would formulate new rules and say ‘sorry, we’re going to do that now, we don’t want to know about your problems’,” he says.

Shepherd shares this concern. “If there is another terrorist event, security will go to another level. We’re not in the driving seat,” he comments.